Heebner Hedge Fund Targets $5 Billion With Lure of Top Returns

Bloomberg – Kenneth Heebner, manager of the top-ranked U.S. stock mutual fund, is seeking as much as $5 billion for his first hedge fund.

Heebner, who has worked in the mutual-fund business almost four decades, formed a private investment partnership in June called Wayfarer Capital LP, according to Aug. 14 regulatory filings. The size of the fund, which had raised $73 million from wealthy investors and institutions, may vary from the target, Wayfarer Capital said in the filings.

A private fund would free Heebner from most regulatory oversight and allow him to buy or sell any assets, unlike mutual funds, which are more tightly controlled. Hedge funds also charge higher fees, including a cut of investment profits.

“He has wanted to do this for a long time,” said Janine Hermsdorf, who retired in December as the head trader at Heebner’s Boston-based Capital Growth Management LP after working with him for 27 years. “This was just the time to go ahead.”

Martha McGuire, a spokeswoman for Capital Growth Management, declined to comment on the filings by Wayfarer Capital with the U.S. Securities and Exchange Commission and state regulators. Stephen McShea, an attorney in the Boston office of Dechert LLP, the law firm that helped set up the partnership, also declined to comment.

Heebner’s CGM Focus Fund had the best performance among diversified U.S. stock mutual funds this year through June 30, gaining 17 percent including dividends, compared with the 12 percent decline by the Standard & Poor’s 500 Index, according to data compiled by Chicago-based Morningstar Inc. The fund has since fallen 29 percent, while the benchmark index is off 3.9 percent, illustrating the swings that often accompany Heebner’s approach to stock-picking.

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